WAEC SSCE - Commerce - 2022

Average stock is derived by adding

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Average stock is a measure used in accounting to determine the average value of inventory held during a particular accounting period. It is calculated by adding the opening stock and closing stock of the accounting period and dividing the sum by 2. This gives the average stock held during the period. The formula for calculating average stock is: (Opening stock + Closing stock) ÷ 2. Therefore, the correct option is "opening stock to closing stock divided by 2".

The agreement which led to the formation of the West African Clearing House was signed in

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Which of the following organizations provide essential goods and services at low cost to citizens?

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Public enterprises provide essential goods and services at low cost to citizens. Public enterprises are government-owned and operated entities that provide goods and services to the public at a subsidized rate, with the aim of ensuring that basic necessities are available to all citizens, regardless of their ability to pay. Examples of public enterprises include water supply, electricity, transportation, and healthcare.

An internal source of finance to an entrepreneur is

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An internal source of finance to an entrepreneur is "retained earnings." Retained earnings are the profits earned by a company that are kept within the company instead of being distributed as dividends to shareholders. These retained earnings can be used by the company to finance its operations, invest in new projects or ventures, or pay off debt. Therefore, it is an internal source of finance as the entrepreneur does not need to seek external sources like banks or other financial institutions to get funds.

The service of a retailer is part of production because it

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The service of a retailer is considered a part of production because it plays a critical role in making finished goods available to consumers. Retailers provide the necessary link between producers and consumers by purchasing goods from manufacturers and making them available for purchase by end-users. Without retailers, finished goods would not be able to reach the intended consumers, which would disrupt the entire production process. Furthermore, retailers also help to increase consumers' standard of living by providing them with access to a wide variety of goods and services. Hence, the service of a retailer is an integral part of the production process.

Payment made to a carrier for transportation of goods is

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The correct term for the payment made to a carrier for transportation of goods is "freight". Freight refers to the charge or fee paid for the transportation of goods by land, sea, or air. The cost of the freight can depend on various factors, such as the distance to be covered, the weight of the goods, the mode of transportation, and any additional services required.

A partner who contributes only his name to the formation of a partnership is

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A partner who contributes only his name to the formation of a partnership is a "nominal partner". This means that the partner is not actively involved in the day-to-day operations of the business and does not make any significant contributions in terms of capital or expertise. The nominal partner is essentially a figurehead or a silent partner, and is usually included in the partnership agreement for the purpose of lending credibility to the business or to provide some other strategic benefit.

Which of the following is not a characteristic of a commercial bank?

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The characteristic that is not of a commercial bank is "Established to issue bank notes". Commercial banks are established as limited liability companies with the aim of making profits by offering financial services such as accepting deposits, granting loans, and providing various financial services to individuals, businesses, and governments. They are also established by individuals or organizations, but they are not specifically established to issue banknotes, as that is the function of a central bank.

A document used to ensure correct payment of duty at the importing country is

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The law by which a seller transfers the property in goods to a buyer at an agreed price is the 

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The law by which a seller transfers the property in goods to a buyer at an agreed price is the Sale of Goods Act. This act provides legal protection to buyers and sellers in the exchange of goods. It defines the terms and conditions of the sale, such as the price, quantity, quality, and delivery of the goods. It also outlines the rights and obligations of both the buyer and the seller in the transaction, such as the right to inspection and the right to reject faulty goods. Overall, the Sale of Goods Act helps ensure fair and smooth transactions between buyers and sellers.

Which of the following is not a function ol management?

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A group of sellers who pool their resources to buy goods in large quantities and sell to its members is a

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Consumers could be encouraged to purchase a company's products through

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Consumers could be encouraged to purchase a company's products through advertisement. Advertisement is a form of marketing communication that is used to persuade and encourage consumers to buy a product or service. It involves creating awareness and promoting the features and benefits of a product or service to a target audience through various media channels such as television, radio, newspapers, magazines, social media, and billboards. Effective advertisement campaigns are designed to create a favorable impression of a company's product in the minds of consumers, ultimately leading to increased sales and revenue for the company.

A retail store that sells a single product from a particular manufacturer is a

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An organizational chart of a company shows the

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An organizational chart of a company shows the hierarchy of staff in the company. It is a graphical representation that shows the different levels of management and the relationships between them. The chart shows the chain of command, which indicates who reports to whom and who is responsible for which tasks. The chart can also show the different departments within the company and how they are related. The purpose of the organizational chart is to help employees understand the structure of the company and their roles and responsibilities within it.

A cheque is specially crossed if

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A cheque is specially crossed if the name of the bank is written between two parallel lines drawn across it. This type of crossing provides an additional layer of security to the cheque as it can only be paid into the account of the payee with the named bank. It prevents the cheque from being paid to any other bank or cashed over the counter. Therefore, the payee must deposit the cheque into their bank account for it to be cleared and the funds credited to their account.

Dealers in the stock exchange such as bulls, bears and stags are categorized as

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Dealers in the stock exchange such as bulls, bears and stags are categorized as "speculators". Speculators are investors who take on higher risks in order to make profits from market fluctuations. Bulls are speculators who believe that the market will rise and buy securities in anticipation of rising prices, while bears are speculators who believe the market will fall and sell securities to avoid losses. Stags, on the other hand, are speculators who buy shares at an initial public offering (IPO) and sell them quickly after listing for a profit.

Advertisement which is geared towards a particular audience is

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The answer is (a) direct advertising. Direct advertising is an advertising strategy that targets a specific group or audience based on their demographics, behaviors, interests, or preferences. The goal of direct advertising is to increase the likelihood of reaching potential customers who are more likely to be interested in the product or service being advertised. This is often achieved through targeted advertisements in specific media channels or platforms, such as social media or email marketing. Direct advertising is different from mass advertising, which is designed to reach a wide audience, regardless of their interests or preferences. Indirect advertising focuses on creating a favorable impression of a product or brand by associating it with other things that are appealing to the target audience. Persuasive advertising aims to convince the audience to take a particular action, such as purchasing a product or subscribing to a service.

An advantage of rail transport is that it

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An advantage of rail transport is that it is suitable for transporting bulky and heavy goods. Railways have large carrying capacity and can transport huge quantities of goods over long distances. The rail infrastructure can handle heavy and bulky goods such as minerals, coal, timber, and machinery, which would be difficult or expensive to transport by road or air. This is because railways can support heavier loads and are not subject to weight restrictions like road transport. Therefore, rail transport is a cost-effective and efficient means of transporting heavy goods in large quantities over long distances.

When a share with a nominal value of N50 is quoted at N70, it is being sold

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When a share with a nominal value of N50 is quoted at N70, it is being sold "at a premium". This means that the market value of the share is higher than its face value or nominal value. In other words, investors are willing to pay more than the actual value of the share because they expect the company's profits to increase, and the share price to rise further in the future. This is a common occurrence in the stock market, and it reflects the demand for the company's shares by investors.

A retail business that sells goods by post, using catalogues is a

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A retail business that sells goods by post, using catalogues is a mail order firm. This means that the customers can order products from a catalogue by mail or telephone and the products will be delivered to them by post. Mail order firms typically have a wide variety of products available for purchase, and customers can browse the catalogue at their leisure before making a purchase. They are often used for purchasing items that may not be readily available in local stores, or for convenience when shopping from home.

The incentive given to a buyer to encourage prompt payment is

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A discount given to a buyer to encourage prompt payment is known as a "cash discount". This is a reduction in the price of the goods or services being sold, which is offered to the buyer if they pay their bill within a specified period of time. For example, a seller might offer a 2% discount on the total invoice amount if the buyer pays within 10 days of receiving the invoice. The purpose of the cash discount is to incentivize buyers to pay their bills quickly, which helps the seller to improve their cash flow and reduce the risk of bad debts.

Which of the following groups would advocate for the supply of constant electricity to households?

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The group that would most likely advocate for the supply of constant electricity to households is the consumers' association. This is because the consumers' association represents the interests of consumers and their goal is to ensure that consumers receive the best possible service. Access to constant electricity is a basic need for households, and the consumers' association would work to ensure that electricity providers are held accountable for providing a reliable and consistent supply of electricity to consumers. The credit union represents the interests of its members regarding financial services, while the employers' association represents the interests of employers, and the labor union represents the interests of employees. While access to electricity may be a concern for both employers and employees, it is not their primary focus, unlike the consumers' association.

The number of subordinates a head of department supervises is

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One of the aims of ECOWAS is to

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Sea vessels that do not operate on regular times and routes are

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The of the products of the construction industry is a

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Use the information below to answer question 13 and 14

calculate the working capital.

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A disadvantage of privatization is

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The purpose of commercialization is to

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Commercialization is a process that involves transforming state-owned enterprises into commercial or profit-oriented entities. The primary purpose of commercialization is to make state-owned firms more efficient by instilling private sector practices and management techniques into their operations. By doing this, state-owned firms can become more self-sustaining and less reliant on government subsidies, and ultimately contribute to economic growth. Commercialization can also encourage the flow of foreign capital and promote greater private sector participation in the economy.

Which of the following is not a right of a consumer?

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The right to buy on credit is not a right of a consumer. This is because credit is not a right but a privilege, which is extended to a consumer based on their creditworthiness. While consumers have the right to obtain credit if they meet the requirements, they do not have an inherent right to buy on credit. The other options listed are all rights of consumers. The right to a fair hearing ensures that consumers have a chance to express their views when there is a dispute. The right to obtain replacement guarantees that consumers can replace products that are faulty or defective. The right to a safe product ensures that products meet safety standards and do not pose a risk to consumers.

The commission on a postal order is

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The commission on a postal order is known as poundage. Poundage is the fee charged by the post office for providing a postal order service. It is usually a percentage of the total amount of the order and is added to the cost of the order. This fee is charged to cover the cost of processing the order and to provide revenue for the post office. The amount of poundage charged may vary depending on the amount of the order and the location where the order is being sent.

Central banks sell treasury bills to the public to

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One of the functions of a trade association is to

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A trade association is an organization that is formed by a group of businesses or companies in a particular industry. One of the main functions of a trade association is to promote and protect the interests of its members. This may include lobbying for favorable legislation, providing resources and support to help members navigate industry challenges, and promoting the industry as a whole to the public. Therefore, the option that best describes one of the functions of a trade association is "promote members' welfare."

The resources put together to create goods and services are

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The resources put together to create goods and services are referred to as factors of production. These are the inputs used in the production process to produce goods and services. The four main factors of production include land, labor, capital, and entrepreneurship. Land refers to natural resources such as forests, water bodies, and minerals used in the production process. Labor refers to the human resources used in the production process. Capital refers to the financial resources used in the production process, such as machinery, tools, and equipment. Entrepreneurship refers to the skills and knowledge required to start and run a successful business. All of these factors of production work together to produce goods and services that meet the needs of consumers.

Calculate the gross profit.

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The marketing concept emphasizes

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The marketing concept emphasizes the consumer's satisfaction at a profit. This means that businesses should focus on identifying and satisfying the needs and wants of their target customers, rather than simply producing and selling goods. By understanding and meeting the needs of consumers, businesses can build strong relationships with their customers and ultimately drive profitability. The marketing concept involves researching and analyzing customer needs, developing products that meet those needs, promoting those products effectively, and providing high-quality customer service.

A document that instructs an agent to buy goods from a named firm is

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A document that instructs an agent to buy goods from a named firm is called a "closed indent". It is a type of purchase order that specifies the details of the goods to be purchased, such as the quantity, price, and delivery date. The indent is "closed" because it is issued to a specific supplier or firm, as opposed to an "open indent" which is issued to multiple suppliers for competitive bidding. The closed indent is commonly used in international trade to facilitate the purchase of goods from a foreign supplier through a local agent or middleman.

The quality of money which makes it possible to buy goods in small quantities is

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The quality of money which makes it possible to buy goods in small quantities is divisibility. Divisibility refers to the ability of money to be divided into smaller units and still retain its value. This allows for transactions to occur for small amounts, as well as for larger amounts. For example, a dollar can be divided into 100 cents, making it possible to buy goods that cost less than a dollar. This quality is important for the convenience of trade and commerce, as it enables the exchange of goods and services for any desired amount of money.

Which of the following documents would a shareholder inspect to know his voting rights?

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A shareholder would inspect the Articles of Association to know his voting rights. The Articles of Association outlines the rules and regulations governing the internal management of a company, including the voting rights of shareholders. The document specifies the number of votes each shareholder is entitled to, the conditions under which votes can be cast, and the procedures for voting. The other options, such as the Certificate of Incorporation, Certificate of Trading, and Memorandum of Association, do not provide information about the voting rights of shareholders.

The act of removing government laws and allowing market forces to determine prices is

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The act of removing government laws and allowing market forces to determine prices is called deregulation. This means that the government no longer regulates prices of goods and services, but instead allows market forces of supply and demand to determine the prices. Deregulation can occur in various industries, such as telecommunications, transportation, and energy, and it is often seen as a way to increase competition, improve efficiency, and lower prices for consumers.

The growth of Pro commerce is not enhanced by

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One of the functions of commercial banks that cannot be performed by central banks is

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Commercial banks and central banks are both important players in the banking system. However, they perform different functions. One of the functions of commercial banks that cannot be performed by central banks is the collection of deposits from the public. Commercial banks accept deposits from individuals and businesses and use the money to make loans and investments. Central banks, on the other hand, are responsible for regulating the money supply, controlling inflation, and stabilizing the economy through monetary policy. While central banks can issue and redeem government securities such as treasury bills, they do not collect deposits from the public. Therefore, the correct option is: "collection of deposits from the public."

A country's visible balance of payment is made up of

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A country's visible balance of payments is made up of earnings from goods exported. This refers to the income that a country receives from selling its products and services to other countries. It includes both physical goods, such as cars and electronics, as well as intangible goods, such as software and financial services. Other items, such as interest on loans to foreign countries, profit from investment abroad, and dividend earned from companies, are not included in the visible balance of payments, but are instead part of the country's overall balance of payments.

The principle which prevents an insured from receiving a claim that is more than the value of the loss, if the property is insured by more than one company is.

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The principle that prevents an insured from receiving a claim that is more than the value of the loss if the property is insured by more than one company is called "contribution". Essentially, this principle ensures that the insured is not overcompensated for their loss by multiple insurers. Under this principle, each insurer will pay a proportionate amount of the loss based on the value of the policy they issued compared to the total value of all policies covering the property. For example, if a property is insured for $100,000 by two different insurance companies, and it sustains a loss of $50,000, each company will pay $25,000 towards the loss.

A requirement for an offer to be valid is that it should be

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For an offer to be valid, it must be communicated to the offeree. This means that the person making the offer (offeror) must clearly express their intention to be bound by the terms of the offer to the person receiving the offer (offeree). The offeree must be aware of the offer, understand the terms of the offer and have the ability to accept or reject the offer. Without proper communication of the offer, there can be no valid offer, and therefore, no contract can be formed.

An undertaking to repair a customer's vehicle for a certain period after it has been sold is 

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After-sales service is the correct answer. After-sales service refers to the support provided to customers after they have purchased a product or service. This includes services such as repair, maintenance, and technical support. In this case, the undertaking to repair a customer's vehicle for a certain period after it has been sold is an example of after-sales service. The purpose of after-sales service is to ensure customer satisfaction, build customer loyalty, and increase the likelihood of repeat business.

An agency agreement in which the principal approves the action of his authorized representative is agency by

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The provision of services is classified under

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The provision of services is classified under tertiary production. Tertiary production is also known as the service sector of an economy. This sector is responsible for the production and delivery of services to customers rather than the production of physical goods. Examples of industries in the service sector include healthcare, education, transportation, hospitality, and consulting.

An article used as a means of exchange in the early days of trade in West Africa was

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The article used as a means of exchange in the early days of trade in West Africa was Cowrie. Cowrie shells were used as a form of currency in many parts of Africa, including West Africa, due to their natural beauty, rarity, and durability. Cowrie shells were easy to transport, and their value was universally recognized, making them an ideal form of currency for use in trade. Cowries were used for trade in many parts of West Africa, including Ghana, Nigeria, and Gambia.

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(a) The company would derive the following benefits from using television to advertise its products: 1. Wide reach: Television is a mass medium that can reach a large number of people in different geographic locations. This means the company can reach a larger audience with its advertising message. 2. Visual impact: Television advertising can use visual effects and animations to create a powerful impact on viewers, which can help to increase the recall of the company's brand and products. 3. Flexibility: Television advertising can be tailored to suit different target audiences and can be scheduled to run at different times of the day to reach specific demographic groups. 4. Increased sales: By creating awareness and generating interest in the company's products, television advertising can help to increase sales and revenue for the company. (b) Other promotional means the company could adopt include: 1. Print advertising: This involves placing advertisements in newspapers, magazines, and other print media to reach a targeted audience. 2. Digital marketing: This involves using online channels such as social media, search engines, and email marketing to reach a wider audience. 3. Sponsorship: The company could sponsor events, sports teams, or other organizations to create visibility and generate brand awareness. 4. Sales promotions: This involves offering discounts, coupons, or other incentives to customers to encourage them to buy the company's products.

ABC Limited, a textile company and XYZ Limited, a cotton processing company agreed to merge. (a) Identify and explain the type of merger to be formed by the companies. (b) State four reasons that would have necessitated the formation of the merger. (C) List and explain three sources of finance available to the company formed.

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(a) The type of merger to be formed by ABC Limited and XYZ Limited is a vertical merger. This is a type of merger where two companies that are at different stages of the production process or supply chain come together to form a single entity. In this case, ABC Limited is a textile company, while XYZ Limited is a cotton processing company. By merging, ABC Limited will have better control over the cotton supply chain, and this will lead to increased efficiency in their textile production. (b) The following are four reasons that would have necessitated the formation of the merger: 1. Economies of scale: By merging, the companies can take advantage of economies of scale, such as bulk purchasing of raw materials and joint marketing efforts. 2. Improved efficiency: The merger will lead to improved efficiency in the production process, resulting in cost savings and increased profits. 3. Diversification: The merger will allow the companies to diversify their operations and reduce their dependence on a single product line or market segment. 4. Synergy: The merger will create synergies between the two companies, resulting in increased competitiveness and profitability. (c) The following are three sources of finance available to the company formed: 1. Debt financing: This involves borrowing money from financial institutions such as banks or issuing bonds to raise capital for the merged company. 2. Equity financing: This involves issuing shares of the merged company to the public in exchange for capital. 3. Internal financing: This involves using the profits generated by the merged company to finance its operations and growth.

(a) Explain three means of payment in international trade and two means of payment in home trade. (b) Explain five reasons countries engage in international trade.

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(a) Means of payment in international trade: 1. Letter of credit: It is a document issued by a bank on behalf of the buyer, guaranteeing the seller will receive the payment in full and on time. 2. Bill of exchange: It is a written order by the exporter to the importer to pay a certain amount on a certain date, with the bank serving as an intermediary. 3. Telegraphic transfer: It is a method of transferring funds electronically between banks, with the payment being made immediately upon receipt of the transfer. Means of payment in home trade: 1. Cash: It is the most common and simple means of payment in home trade, involving the exchange of physical currency. 2. Credit: It is a means of payment in which the seller allows the buyer to purchase goods or services on the promise of future payment. (b) Reasons for countries engaging in international trade: 1. Access to resources: Countries engage in international trade to obtain resources that are not available in their own country, or are available in insufficient quantities. 2. Economies of scale: By producing on a larger scale, countries can reduce their average cost of production and achieve greater efficiency. 3. Specialization: Countries can specialize in the production of goods and services in which they have a comparative advantage, and trade with other countries for the goods and services they are not efficient in producing. 4. Increased competition: International trade creates greater competition, leading to improvements in product quality and lower prices for consumers. 5. Increased exports: By engaging in international trade, countries can increase their exports and generate revenue, which can help to improve their balance of trade and boost their economy.

The diagrams below are computer devices.

(a) Name any eight of the computer devices labelled A - I.

(b) State one use of any six input devices named in 4(a).

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(a) Names of Computer Devices Labelled A-1: A - speaker. B - microphone. C - web camera/webcam. D - flash drive. E - monitor. F - printer. G -  keyboard. H - optical pen. I - joystick.

(b) Uses of the Following Computer DeviceS: (i) Microphone:- It is a device used to capture voice into the system unit for voice recognition software, (ii) camera: It is a device that captures images for use in the syste. (iii) Flash drive:- It is an external storage device that could be used to copy files from one system for use in another system. (iv) Keyboard- It has a typewriter face with letters, numbers and symbols used to input characters and commands into the system unit. (v) Optical pen: It is a pen that has sensitive eyes that can read characters printed in special colours into the system unit (vi) Joystick: lt is a pad designed for playing computer games. Like the mouse, t allows the user to move the cursor from one end to another.

In a carpentry workshop of three employees, one is responsible for cutting the wood, another for fixing and a third for polishing and spraying the furniture.

(a) Identify the term that describes the production process the workshop uses.

(b)(i) State five advantages of the production process identified in 1(a) to the workshop. (ii) State four disadvantages of the production process identified in 1(a) to the workshop.

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a) The production process used in the carpentry workshop is a division of labor. b) (i) Advantages of division of labor in the carpentry workshop: 1. Increased efficiency: When each worker specializes in a particular task, they can become more skilled and efficient in their work, which can lead to increased productivity. 2. Time-saving: Division of labor can reduce the time needed to produce a finished product, as each worker is responsible for a specific task. 3. Cost-effective: When workers specialize in specific tasks, they become more efficient, which can lead to cost savings for the workshop. 4. Quality improvement: When each worker specializes in a particular task, they can become more skilled at it, leading to a higher quality finished product. 5. Flexibility: The division of labor allows the workshop to easily adjust the number of workers performing a specific task based on the demand for that task. (ii) Disadvantages of division of labor in the carpentry workshop: 1. Boredom: Workers may become bored and demotivated performing the same task repeatedly, leading to a decrease in productivity. 2. Worker dependency: In a division of labor, workers become specialized in one task, which can make them dependent on other workers to complete the finished product. This can lead to a decrease in productivity if one worker is absent or unable to work. 3. Limited skill development: Workers in a division of labor may not develop skills outside of their specific task, limiting their ability to perform other tasks in the workshop. 4. Lack of creativity: Division of labor may limit the creative potential of workers, as they may only be responsible for a single task and not involved in the entire production process.

(a) Differentiate between a trade association and a chamber of commerce. (b) State four functions of a chamber of commerce (c) State four functions of an employers' association.

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a) A trade association is a group of businesses in a particular industry that work together to promote and protect their common interests. On the other hand, a chamber of commerce is an organization that represents the interests of businesses in a particular city, region, or country. b) Four functions of a chamber of commerce are: 1. Promoting local businesses: Chambers of commerce work to promote local businesses through events, advertising, and networking opportunities. 2. Advocating for business interests: Chambers of commerce advocate for the interests of local businesses with government officials and other stakeholders. 3. Providing business support services: Chambers of commerce provide a range of support services to help businesses grow and succeed, including training, mentoring, and access to funding. 4. Fostering economic development: Chambers of commerce work to attract new businesses and industries to the area, which can create jobs and boost the local economy. c) Four functions of an employers' association are: 1. Collective bargaining: Employers' associations negotiate with labor unions on behalf of their member companies to reach collective bargaining agreements. 2. Legal representation: Employers' associations provide legal representation and support to their member companies in labor disputes and other legal matters. 3. Advocacy: Employers' associations advocate for the interests of their member companies with government officials and other stakeholders. 4. Information and resources: Employers' associations provide their member companies with access to information, resources, and best practices related to labor relations, human resources, and other business topics.

(a) List Four sources of credit available to a sole trader. (b) Explain the following credit instruments: (i) acceptance credit; (ii) luncheon voucher; (iii) bill of exchange. (c) State two advantages and three disadvantages of hire purchase to the seller.

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(a) Four sources of credit available to a sole trader are: 1. Trade credit: This is the credit extended by suppliers to the sole trader to purchase goods or services on credit, with a specified period to pay back the debt. 2. Bank loans: This involves borrowing money from banks to finance the business activities of the sole trader, with an agreement to repay the loan with interest over a specified period. 3. Personal savings: This involves using personal savings to finance the business activities of the sole trader, without incurring any interest charges. 4. Crowdfunding: This involves raising funds for the business activities of the sole trader from a large number of people through an online platform. (b) Explanation of credit instruments: (i) Acceptance credit: This is a type of credit where the seller draws a bill of exchange on the buyer, who accepts the bill by signing it. The buyer is then allowed to defer payment until the maturity of the bill, while the seller can discount the bill with the bank to obtain immediate payment at a reduced amount. (ii) Luncheon voucher: This is a type of credit instrument used to provide employees with subsidized meals during lunchtime. The vouchers are typically issued by the employer and can be redeemed at designated restaurants or canteens. (iii) Bill of exchange: This is a written document that orders the debtor to pay a certain amount of money to the creditor at a specified future date. It is a widely used instrument for financing trade transactions. (c) Advantages and disadvantages of hire purchase to the seller: Advantages: 1. It enables the seller to sell high-value items to customers who cannot afford to make full payment at once, thus increasing sales volume. 2. It provides a regular stream of income for the seller over the hire purchase period. Disadvantages: 1. The seller is exposed to credit risk, as there is a possibility that the buyer may default on payment. 2. The seller may incur administrative costs in managing the hire purchase agreement. 3. The seller may not receive the full value of the goods sold, as the interest charged on the hire purchase may reduce the overall revenue earned.